QUALCOMM, Inc. (NASDAQ:QCOM)’s latest quarterly numbers clearly depict that it has benefited from the enormous demand for smartphones. Revenue for the fourth quarter increased 29% from last year to $6.02 billion. Net income of $1.9 billion represents a 36% boost on an yearly basis. The company has kept investors happy over the last few quarters. Let’s see if it can continue to give them a reason to smile this year.
The present position
The stock has continuously risen this year, and to add to investors’ joy, more cash will be flowing towards them. QUALCOMM, Inc. (NASDAQ:QCOM) is increasing its yearly dividend to $1.40 a share, a 40% hike which takes the yield to 2% at its current price level. Further, the company has introduced a new stock repurchase plan of $5 billion, replacing the previous one which had $2.5 billion left.
I believe, that the since the stock is going strong, there was no need for a share buyback program to support it. Nonetheless, it will definitely add to investors’ returns.
The company presently is the market leader in developing and marketing CDMA technology. It owns a bundle of licenses, patents, and trade secrets related to the CDMA technology which it uses in its personal products, and it also licenses to other companies. Qualcomm charges a certain percentage of the price of the phone, assuring its revenue stream in the near future.
The smartphone market has grown, and the continued momentum makes it look almost certain that the market should cross the 1 billion mark by the end of 2013. Tablets sales are also on the rise, and IDC estimates the tablet market to reach 260 million by 2016. QUALCOMM, Inc. (NASDAQ:QCOM) is poised to grow from emerging markets like China and India, where a transition from feature phones to smartphones is taking place .
Moreover, China provides a tremendous opportunity for Qualcomm with a boom in demand for 3G enabled smartphones. A strong mobile subscriber footing, and the shift from 2G to 3G in India and China, represents a vast opportunity for the company to benefit from the sale of its chipsets, besides steady licensing fees.
Qualcomm commands more than 50% market share of the growing cellular baseband market. It enjoys nearly a monopolistic control over the budding LTE baseband market, which is clearly evident from the fact that it shipped 86% of the 47 million LTE-capable chipsets shipped in the preceding year. Further, Qualcomm is in its third-generation of chipsets, while competitors are bringing their first LTE baseband chips to the market.
The company’s far-sighted outlook, and its practical strategy to make its baseband chips LTE-compatible, and incorporate them with its Snapdragon processors, have given it a leading edge. Qualcomm’s latest RF360 further improves the company’s stand by letting handsets work on most LTE frequencies.
The competitive ground
Qualcomm is seeing some competition from the likes of NVIDIA Corporation (NASDAQ:NVDA) and Broadcom Corporation (NASDAQ:BRCM). NVIDIA’s Tegra 4i mobile LTE chip will contest Qualcomm’s Snapdragon S800 for efficiency and battery life. It has already imprinted a noteworthy market share for tablets with its Tegra SoC, and it would be rather interesting to notice whether it can create its own market in the near future.